Is the Indian IT industry declining?

For decades, the Indian IT industry has been the backbone of the nation's economic growth—a $245 billion powerhouse generating millions of jobs and earning global recognition. But recent indicators have raised questions about its future trajectory. With growth slowing, layoffs increasing, leadership changes accelerating, and AI transforming the landscape, it's time to examine whether we're witnessing a decline or merely a profound transformation.

The Current State: Growth Deceleration, Not Collapse

The numbers tell a complex story. The Indian IT sector's growth rate dropped to 8.4% in FY23 from 15.5% in FY22—a significant deceleration but far from a collapse. Major players are facing unprecedented challenges:

• Infosys reported year-over-year revenue decline for the first time in recent history
• Wipro experienced leadership instability with multiple executive departures
• TCS (Tata Consultancy Services) faces margin pressures despite its dominant market position
• Tech Mahindra and other mid-tier firms struggle to differentiate in an increasingly competitive landscape

Yet, amid these challenges, the sector added 290,000 new jobs and projections indicate IT spending growth of 11.2% in 2025. This suggests not an industry in free fall, but one in transition—moving from explosive growth to a more mature, focused expansion phase.

AI Revolution: Existential Threat or Transformation Catalyst?

Perhaps no factor is reshaping the Indian IT landscape more dramatically than artificial intelligence and automation. Industry analysts project that over 225,000 mid-level jobs could disappear in the next decade as routine tasks become automated. The days of large-scale hiring for basic coding and support functions are waning.

This technological shift is forcing a fundamental rethinking of the industry's value proposition:

• AI-powered development tools are reducing the need for large coding teams
• Automated testing and quality assurance are streamlining previously labor-intensive processes
• Chatbots and AI customer service solutions are transforming BPO operations

Indian IT companies must evolve from providers of labor arbitrage to creators of intellectual property and innovation. The companies succeeding in this environment are those investing heavily in AI capabilities while retraining their workforce for higher-value work that complements rather than competes with AI.

Emerging Bright Spots: SaaS and Product Development

India's Software-as-a-Service (SaaS) sector represents a promising growth avenue, with projections suggesting it could reach $63 billion by 2032, growing at an impressive 27% CAGR. Companies like Zoho, Freshworks, and Postman have demonstrated that Indian firms can compete globally in the product space.

Key trends in the Indian SaaS ecosystem include:

• Vertical SaaS solutions targeting specific industries like healthcare, fintech, and education
• AI-powered enterprise applications leveraging India's data science talent
• Developer tools and infrastructure built by engineers for engineers
• Global market focus rather than just domestic customers

However, perspective is important—SaaS currently represents only a fraction of the overall $245 billion IT industry. The transition from services to products requires not just technical expertise but different business models, go-to-market strategies, and organizational cultures. Many startups entering this space lack the fundamentals needed for long-term success in a highly competitive global market.

The GCC Evolution: From Cost Centers to Innovation Hubs

Global Capability Centers (GCCs) have evolved dramatically from their origins as basic offshore support operations. Today, approximately 1.9 million professionals work in these centers, increasingly focused on core business functions, R&D, and product development rather than just back-office operations.

The modern GCC in India is characterized by:

• Full-stack development capabilities rather than maintenance-only operations
• Advanced data analytics and AI research serving global markets
• Digital transformation leadership for parent organizations
• Product innovation and intellectual property development

This growth of GCCs represents both an opportunity and a challenge for traditional IT service providers. As more global corporations build robust in-house capabilities in India, they reduce dependence on third-party vendors. This strategic insourcing trend is reshaping the competitive landscape, forcing IT service providers to move up the value chain or risk obsolescence.

Leadership Challenges: Symptom of Deeper Transformation

The wave of C-suite departures at major IT firms—including Wipro, Infosys, and Tech Mahindra—reflects the industry's strategic crossroads. While leadership changes can inject fresh perspectives and innovation, the pattern of exits suggests underlying uncertainty about future direction.

These transitions come at a critical time when firms must navigate:

• Technological disruption from AI and automation
• Evolving client expectations around digital transformation
• New competitive threats from cloud hyperscalers and specialized boutique firms
• Pressure to maintain margins while investing in new capabilities

Stable leadership with clear vision will be essential for successfully steering through this period of transformation.

The Path Forward: Evolution, Not Extinction

The evidence suggests the Indian IT industry isn't declining so much as undergoing a profound evolution. The traditional outsourcing-led model that propelled India to global prominence is indeed weakening, but new models are emerging:

• Value over volume: Success will increasingly be measured by impact and innovation rather than headcount
• Products over services: Building intellectual property and platforms rather than just delivering billable hours
• Specialized expertise over general capabilities: Developing deep domain and technical knowledge in high-growth areas
• Consulting-led engagements that drive business transformation rather than just cost savings

India possesses significant advantages in this new landscape, including:

1. The world's largest AI-ready talent pool (representing 16% of global AI talent)
2. Established capabilities in emerging technologies like blockchain, quantum computing, and cybersecurity
3. Supportive government initiatives like Digital India and National AI missions
4. A vibrant startup ecosystem generating innovation across sectors
5. Deep experience in managing complex IT projects and distributed teams

Conclusion: Adaptation Will Determine Winners and Losers

The Indian IT industry stands at an inflection point similar to those faced by other maturing tech hubs throughout history. The sector isn't facing extinction but rather a necessary and ultimately beneficial transformation.

Companies that cling to outdated business models will indeed decline, while those embracing new technologies, developing innovative products, and cultivating specialized expertise will thrive. This evolution may be uncomfortable and disruptive in the short term but will likely produce a more resilient, valuable, and sustainable industry in the long run.

The ultimate question isn't whether the Indian IT industry will survive—it's which players will successfully navigate the transition and emerge as leaders in the next chapter of India's technology story.

Keywords: Indian IT industry transformation, IT sector growth 2025, artificial intelligence impact on Indian IT, SaaS companies India, Global Capability Centers (GCCs), digital transformation services, IT workforce reskilling, technology outsourcing trends, IT leadership challenges, Indian tech ecosystem evolution